High oil prices clip travellers' wings

HIGH oil prices have forced Australians to change their transport plans in the air as well as on the ground. They are taking fewer plane trips because of fuel surcharges imposed by airlines.

Analysis by CommSec shows the cost of air travel rose 3.9 per cent last financial year despite price discounting led by the Qantas offshoot, Jetstar. Consumers responded by making 1.5 per cent fewer plane trips.

Reduced air travel coincides with a 2.9 per cent drop in international visitors to Australia in the year to August.

CommSec's chief economist, Craig James, said airlines should be as willing to cut ticket prices when oil prices fell as they were to lift them when prices rose.

"People say 'well, OK, you've increased the surcharges a number of times - perhaps one of those surcharges needs to come off," Mr James said.

The price of oil has dropped about $US18 a barrel, or almost a quarter, since peaking in July.

This would have reduced road travel to less than 200 million kilometres, figures published by the Department of Transport show. The analysis shows commuters are using more public transport. The number of ferry passenger trips rose 8.8 per cent over the year.

CommSec's analysis of unpublished national accounts data shows consumers are spending less on essentialsW than ever before, at 45 per cent of household spending, and more on luxuries, at 18 per cent.

Each week every Australian spent an average of $56.12 on food, $34.56 on cafes and restaurants, $18.67 on clothing and $15.27 on petrol. They spent $14.58 on telephones and mobile phones, $11.58 on electronics and $10.99 on alcohol, and lost $17.52 on gambling.

A record 8.5 million mobile phones were imported in the year, as people replaced and upgraded their phones.

Spending on electronics like computers and DVD recorders has soared as prices have fallen. Electronics prices fell 7.1 per cent over last year.

After adjusting for improving quality, consumers bought more than 40 times as much computing equipment as they did only a decade earlier.

The quantity of food consumed, in contrast, is rising by less than 1 per cent a year.

Spending on tobacco fell 2.3 per cent as people cut down on smoking, while dry weather caused a 1.5 per cent fall in sales of garden supplies.

Spending on newspapers and books also fell, by 0.5 per cent.

Mr James said households spent less than 1 per cent of their budgets on water, the lowest proportion in 30 years. "It does seem to suggest consumers can pay more appropriate prices for their water without causing too much hardship," he said.

Overall, household spending grew at its slowest rate in 12 years, at 2.6 per cent, partly in response to higher prices.